Subcontractor Payment Disputes

You should first review your contract to understand payment terms and deadlines. If the contractor is consistently late, communicate your concerns in writing, and consider involving a legal professional to help enforce your payment rights.

This depends on your contract and applicable laws. Stopping work can be a risky move and may result in further disputes or contract termination. Consult with a lawyer to explore your options.

Document your work thoroughly and ensure it meets contract specifications and industry standards. Be prepared to discuss the issue with the contractor and, if necessary, seek mediation, arbitration, or legal action.

Yes, Queensland has legislation like the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) that regulates payment disputes in the construction industry.

A subcontractor’s charge is a way for a subcontractor to secure monies that are owed to them under a contract by someone higher in the contractual chain.

Essentially, it allows the subcontractor to bypass the contractor they were engaged by and instead put the principal or even the landowner of a project on notice for payment.

A subcontractor’s charge generally only covers payment claims if certain conditions have been met. To lodge a charge, the following needs to apply:

• your payment claim is for work done under your subcontract; and
• money is still owed to the contractor by the person higher in the contractual chain — if the contractor has been paid in full, then a subcontractor’s charge cannot be used.

If the above conditions have been met, then a subcontractor’s charge can be lodged by any subcontractor who has been engaged to carry out work under a building contract by a contractor. This work could be related to building or land work, such as construction, demolition, alteration, and building repair.

The first step in lodging a subcontractor’s charge is for the subcontractor to lodge a Form s122 Notice of Claim to the principal of the project and the contractor that engaged them. This form is available online here or on the QBCC website.

The Notice of Claim form requires information such as:

• the monetary amount of the claim;
• details of the work that has been done or the goods that have been supplied;
• details about the contractor; and
• details about the project’s principal.

If the subcontractor does not have the information readily available, they will need to ask the contractor for it in writing. The contractor must respond to the request for information within ten business days. If the contractor fails to do so, this can be reported to the Queensland Building and Construction Commission (QBCC) for investigation.

The claim will also need to be certified by a qualified person, which under the Building Industry Fairness Act could be a registered architect, registered engineer, or a person licensed to carry out or supervise work that the claim relates to under the Queensland Building and Construction Commission Act 1991 (Qld) (the QBCC Act).

There are strict time limits that apply when lodging subcontractors’ charges. For example — if the project work has reached the practical completion stage, then the subcontractor’s charge must be lodged within three months.

If the Notice of Claim form is not served on both the principal and the contractor, the subcontractor’s charge will have no effect.

Once the subcontractor’s charge claim has been lodged, the contractor has ten business days to respond. The contractor responds to both the subcontractor and the person higher in the contractual chain (usually the project principal or landowner) in a response to the notice of claim form.

They have the option to accept or dispute the claim. If the claim is disputed, the full amount may be disputed, or a partial amount may be disputed.
If the contractor does not respond within the timeframe, they can be reported to the QBCC.

If the contractor accepts liability for the subcontractor’s claim, the person higher in the contractual chain will pay the subcontractor the claimed amount or the amount that has been stated in the contractor’s response.

If the contractor disputes or does not accept the subcontractor’s claim, the subcontractor can commence court proceedings to have the charge enforced.

Court proceedings must be commenced within one month from when the notice of claim was first given.

One of the main benefits of a subcontractor’s charge is that it protects the subcontractor — especially in the instance of a building company going into liquidation.

If the contractor who engaged the subcontractor goes into liquidation, and the subcontractor has lodged a subcontractor’s charge claim, then the subcontractor becomes a secured creditor in the liquidation. This means that the subcontractor will be prioritised over other creditors of the company.

A subcontractor’s charge requires adherence to strict timeframes as well as accurate information. If a subcontractor fails to provide the correct and accurate information or to adhere to the timeframes, then the subcontractor’s charge claim may be ineffective.

It can also affect relationships in the building industry if a claim is lodged when it may not have been the best course of action and could affect the subcontractor’s ability to secure work in the future. This is not to say that you shouldn’t pursue this course of action if a subcontractor is owed money, rather, if a subcontractor finds themselves in this situation, then their best course of action is to understand where they stand legally — this is where we come in.

Yes, you can often negotiate payment terms before signing the subcontract. Ensure that the terms are clear and fair, and follow Queensland’s construction laws.